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Canada Policy Interest Rate 4.5% (consensus 4.5%) in Jul-24

• The Bank of Canada reduced the policy interest rate by 25 basis points to 4.5%, consistent with the economic consensus, reflecting increased confidence in achieving the 2% inflation target.
• Canada's GDP growth increased to 1.5% in H1 2024, with CPI inflation moderating to 2.7% in June; core inflation measures indicate continued downward momentum, although shelter costs remain a significant inflationary pressure.
• The Bank remains vigilant about inflation risks, particularly from shelter and wage-driven services, and will base future interest rate decisions on incoming data and their implications for the inflation outlook, ensuring balanced economic growth and price stability.

Canada CPI Inflation 2.87% y-o-y (consensus 2.6%) in May-24

- Canada’s CPI inflation rate of 2.87% y-o-y in May 2024 exceeded expectations by 0.3pp, reversing almost all of the slowing in April 2024.
- The Core CPI of 1.8% y-o-y was further beyond expectations, although the PPI inflation register of 1.63% y-o-y points to contained cost pressures at the production stage.

Canada Unemployment Rate 6.2% (consensus 6.2%) in May-24

- Canada’s unemployment rate in May 2024 rose to 6.2%, the highest since January 2022, highlighting a weakening labour market amid modest employment gains of 26.7 thousand.
- Concomitant economic data, including declining retail sales, stagnant GDP growth, and a contracting manufacturing sector, underscore a broader economic stagnation necessitating proactive policy measures.

Canada Policy Interest Rate 4.75% (consensus 4.75%) in Jun-24

• The Bank of Canada reduced its policy interest rate by 25 basis points to 4.75%, aligning with the economic consensus, driven by increased confidence in achieving the 2% inflation target.
• Economic growth resumed in Canada with a 1.7% GDP increase in Q1 2024, while CPI inflation eased to 2.7%, supported by declining core inflation measures and narrower price increase breadth across CPI components.
• The Bank will closely monitor core inflation, demand-supply balance, and wage dynamics, with the potential for further rate cuts if inflation continues to ease and confidence in reaching the 2% target solidifies, balanced against the risk of prematurely loosening monetary policy.